Thanks to the The SBS Diva blog for publishing the solution on how to restore the Search option in the context menu. For more information, see their blog post Have SP1? Want your search back?

It says to delete the LegacyDisable registry value in this location:

HKEY_CLASSES_ROOT\Directory\shell\find

Let me add that, to restore the Search… option for drives, you also need to delete the LegacyDisable value in this branch:

HKEY_CLASSES_ROOT\Drive\shell\find

Registry fix

This might very well become one of the most frequently asked questions in Windows 7/Vista. So, here is a .reg file (based on the above registry edit) which automates the work for you. Download shellfind.reg and save it to Desktop. Right-click shellfind.reg and choose Merge.

The Search… context menu option should now be visible when you right-click a file system folder or a drive.